Spending more to save more? How 'spaving' can hurt more than you think
The term "spaving" seems to have taken over social media but for all the wrong reasons. The concept of spending more to save more has now become unsettling for many rational shoppers who are calling out its hypocrisy. Even financial experts are suggesting that the practice does not make much sense at all.
@todayshow More people find themselves buying items they don’t need just because they’re on sale. This form of impulse buying is called “spaving” — spending more to save more. #Christine Romans breaks down the different types of “spaving” and how to avoid falling into the financial trap. #TODAYShow #moneytok ♬ original sound - TODAY Show
What is Spaving and How is it Bad?
Spaving is a mashup of the two words “spending” and “saving”. It basically refers to the practice of spending more to trigger more savings. It works in a number of ways where consumers are enticed to spend more.
For instance, merchants often entice customers to spend a little more by offering a discount on a minimum spend limit. Another example is of minimum order limit for free shipping. In both instances, customers end up spending more to save some money.
Thus, spaving could simply lead to buying things that people don’t need. Furthermore, customers may always spend more than they intended to while feeling that they got a great deal.
In simple words, spaving can trick consumers into spending more by giving an adrenaline rush that comes from snagging a good deal.
"It's not all bad, but the part that's more harmful is the impulse buy and lower-quality items, the fast-fashion example or stuff you don't necessarily need. Buying in bulk isn't great if you're going to throw out the leftovers," Bankrate personal finance expert Ted Rossman noted in a CBS News report.
Furthermore, Dean Kaplan, CEO of Kaplan Collection Agency told Consumer Affairs that about 10% of the agency’s collection cases occur due to spaving.
How to Avoid Spaving?
Consumers need to interrupt their impulse to stray clear of spaving. The CBS report suggests consumers take a second and assess the math and costs of the purchase before falling for a deal.
"I will give myself 24 to 48 hours before purchasing something," Jack Howard, head of money wellness at Ally Financial told USA Today. Howard says that if the purchase still makes sense after the period, consumers may consider going ahead. Unsubscribing from sale alerts can help people curb their impulses.
Creating a shopping list and strictly sticking to it can also help consumers avoid buying things that they don’t need and stick to their prescribed budget.
The CBS report also suggested customers unlink their credit cards from retail websites to make impulse shopping more difficult.
In the Consumer Affairs report, Kalpan suggested that consumers should ask themselves a few questions before falling for a promotion.
Kaplan suggests that consumers should ask themselves if the purchase aligns with their long-term financial goals and will the costs translate into real savings.
The Only Time When Spaving Makes Sense
According to Kaplan, there are only two situations where spaving makes sense. Making bulk purchases for regular-use non-perishable items makes sense, only when they don’t go unused.
The second scenario where spaving makes sense is while buying high-quality durables like furniture and appliances. For instance, appliances that are low maintenance, and energy efficient but expensive, can save money for the consumer in the long term. However, if any mid range or normal alternatives do the same job, consumers should go for them instead.
